Albert Edwards thinks the Bank of England’s top economist is effectively talking “nonsense” by suggesting that investing in property is a better bet than a pension in the current environment.
The notoriously bearish Societe Generale strategist, renowned for making big calls on the state of the world, used his latest Global Strategy Weekly note to take aim at BoE chief economist Andy Haldane.
“Little surprises me in this business any more, but I was stunned that Bank of England Chief Economist Andrew Haldane could state that property is likely to be a better investment than pensions,” Edwards wrote on Wednesday. He called Haldane’s comments “palpable nonsense.”
Edwards ire refers to an interview with Haldane in the Sunday Times at the end of August, in which the Monetary Policy Committee member said: “It ought to be pension but it’s almost certainly property,” when answering a question about preparing for retirement.
“As long as we continue not to build anything like as many houses in this country as we need to… we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north,” Haldane said.
Haldane’s basic argument is that pensions in the UK are not exactly a great investment after years of low interest rates and low yielding assets. Britain has had super-low interest rates since 2009. Low interest rates make borrowing and servicing debt cheap, but it is a nightmare for savers.
On the flipside, property prices are surging and have been doing so almost constantly since the financial crisis. At the last reading, property prices increased by 5.6% on an annual basis in August, according to the Nationwide’s highly respected House Price Index. This sort of thing, Haldane argues, means that property is the best way to go.
Haldane received strong criticism at the time of the interview, with Ros Altmann, the former pensions minister, saying his comments were “irresponsible.” Edwards agrees, arguing that Haldane is part of the reason property prices are rising so much.
“Asset prices, including property, are at nose-bleed valuations because of his central bank money printing,” Edwards writes. “If there really was a shortage of housing in the UK, rents like house prices, would be rising well in excess of the CPI, whereas they have broadly risen in line over the last ten years.”
This is familiar ground for the SocGen strategist, who argued back in April that the British government could “concrete over the entire length and breadth of the UK and house prices would still rise” arguing that Britain doesn’t actually have a shortage of housing, just a big imbalance in supply and demand.
Edwards finishes by comparing Haldane to former US Federal Reserve boss Alan Greenspan, saying: “This irresponsible statement (as a former pensions minister called it) reminds me of Alan Greenspan justifying sky-high P/Es in the late 1990s, citing elevated long-term earnings expectations driven by a new era — a totally stupid thing to say.”
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